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The beauty of simplicity? (Simple) heuristics and the opportunities yet to be realized

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  • Andreas Ortmann

    () (School of Economics, UNSW Business School, UNSW)

  • Leonidas Spiliopoulos

    () (Center for Adaptive Rationality, Max Planck Institute for Human Development, Berlin, Germany)

Abstract

Heuristics are all around us, both in the real world and the literature. There are many of them and there are many—too many—definitions of them. In this chapter we focus on the history of fast and frugal heuristics, as sketched out comprehensively in Gigerenzer, Todd, & the ABC Research Group (1999) and scores of follow-up books. Specifically, we contextualize the emergence of the “Ecological-Rationality” program as an explicit counterpoint to the “Heuristics-and-Biases” program initiated by Kahneman and Tversky that informed and inspired scores of early behavioural economists. Simple heuristics are here understood to be fast and frugal rules of thumb because they ignore information that is available. Also, they ought to reflect cognitive processes (and hence be able to predict) rather than be as-if modelling exercises that explain ex post. We first review in more detail how this battle of programs unfolded and then a) lay out what we consider the considerable accomplishments of the ER program, b) point out some overlooked connections between the ER program and economics, and c) enumerate what we consider to be open questions and challenges.

Suggested Citation

  • Andreas Ortmann & Leonidas Spiliopoulos, 2015. "The beauty of simplicity? (Simple) heuristics and the opportunities yet to be realized," Discussion Papers 2015-25, School of Economics, The University of New South Wales.
  • Handle: RePEc:swe:wpaper:2015-25
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    More about this item

    Keywords

    heuristics; simple heuristics; simplicity; model selection; beauty;

    JEL classification:

    • B20 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - General
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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